News Release

Warsaw

Small markets gain momentum. They are responsible for 50% of new retail space delivered in Q2 2012. Convenience sector grows in importance

2012-07-03T05:00:00Z

According to a new retail market summary Q2 2012 by Jones Lang LaSalle

Warsaw, July 3rd, 2012 – Jones Lang LaSalle published a retail market report summarizing Q2 2012. Set out below are key findings from the research paper:

Supply: In the second quarter of 2012, the shopping centre market expanded by 132,000 sq m. This new stock was shared between five new projects and two extensions. The total shopping centre supply across the country is currently 7,8 million sq m. Altogether, since the start of the current year, shopping centre stock has increased by 220,000 sq m, which accounts for approximately 50% of the total floorspace planned for 2012. Half of new stock in Q2 was shared by cities with populations below 200,000 inhabitants. This confirms that investors interest in smaller markets is pronounced and not just interim.The largest project completed during Q2 2012 was Galeria Korona in Kielce (34,000 sq m), developed by Libra Project. Along with the recently extended Galeria Echo (66,000 sq m), it is the second scheme in this city to feature a similar tenant mix and profile. The retail offer in Gorzów Wielkopolski was substantially widened by the delivery of Nova Park (32,500 sq m). In Tczew, Galeria Kociewska with a four-screen cinema and a supermarket has just been completed. The extension of Słupsk’s Jantar shopping centre saw an attractive new leisure component being added (multiscreen Multikino cinema - the first in town - and bowling) together with new brands joining the portfolio. In Wrocław, a new shopping mall was opened as a part of the larger Sky Tower residential and office complex. Finally, Galeria Brwinów was completed in Brwinów, a satellite town in the Warsaw agglomeration. The 6,200 sq m scheme is a good example of the increasing significance of the convenience sector. Outlet centres, the number of which currently totals seven, are strengthening their performance. Additional three projects are now in the pipeline, the two of which are to be completed still in 2012 – Outlet Park in Szczecin by Echo Investment and Ptak Outlet in Rzgów near Łódź by Ptak Holding.

Demand. Vacancy rates in shopping centres have been stable across the country in the second quarter. The retail park sector features lower demand than that for shopping centres, especially demand from fashion chains. The exact opposite is found with convenience centres, strip malls and small retail parks, whose prospects seem buoyant. This is particularly the case in smaller cities, where these compact projects (with floorspace usually not exceeding 5 000 sq m) are perceived as a good alternative to regular shopping centres. A number of newcomers have started operations on the Polish market, i.e. Karen Millen, LC Waikiki, COS, Kari, Tretorn and Carpisa. In addition, the market debuts of Victoria’s Secret and American Eagle Outfitters have been announced. Additional chains are investigating the Polish market and looking for entrance opportunities.

Rents: Prime rents which concern best floorspace in leading shopping centres remained unchanged on most of the markets. However, in Warsaw a surge of approximately 5% was witnessed, which can be put down to recommercialization process in key projects.

2012 Perspective: At the start of the second half of the year approximately 620,000 sq m of new shopping centre space is under construction, with deliveries to span over the next two years. The majority of floorspace will emerge in small and medium projects (60%) and will be located in cities with populations lower than 200,000 inhabitants (51%). Construction activity in the eight major agglomerations totals 302,000 sq m, out of which 80% is scheduled for 2013 (Poznań City Center, Auchan Bronowice in Kraków, Centrum Wzgórze in Gdynia, Galeria Katowicka and Plac Unii in Warsaw).

Grażyna Melibruda, Associate Director in Retail Department in Jones Lang LaSalle comments: “Market expansion of retail chains remains cautious but stable. Careful examination of each new location is still a must in order to avoid stores cannibalizing their turnovers. On the back of the crisis, many retailers were forced to reduce the size of their portfolios and withdraw from the least profitable locations. Some chains have temporarily put their expansion on hold, and are waiting for the rebound of the economy. Others, particularly those with more accessible pricing, are continuing their intense growth”.